1st Round of Solar Project Bidding System Unsuccessful

Risk in large-scale projects increases due to system change

The results of the first round of the bidding system that started in fiscal 2017 due to the revision of the feed-in tariff (FIT) policy were announced Nov 21, 2017.

While the total capacity to be bid was 500MW, only 141.366MW (less than 30% of the total capacity) was successfully bid. It was a very unsuccessful result.

The upper price limit was ¥21.00/kWh. The lowest winning bid was ¥17.20/kWh, and the highest winning bid was ¥21.00/kWh. However, three of the nine successful bids (about 48.2MW in total) were ¥20.00-20.99/kWh, and other three of them (52.5MW in total) were ¥19.00-19.99/kWh. So, for about 100MW of the 141MW capacity, the winning bid was less than ¥2 lower than the upper price limit. So, the effect of lowering prices came into question.

Probably, the effect of the bidding system is to lower the number of large-scale projects than to lower purchasing prices and promote the use of solar power.

There are probably two major reasons why the bid capacity was significantly lower than the total capacity to be bid. First, the number of sites suited for 2MW and higher grid capacity large-scale solar power plants (connected to extra-high-voltage power transmission lines), which are the target of the bidding system, is deceasing in the first place.

Second, due to the revision of the FIT policy, the risk in investing in large-scale projects drastically increased. For example, there are "three-year period," which defines the period from certification to start of operation, and high insurance fees for participating in a bidding. As a result, the interest in developing new project was dampened.